This guide is maintained as a current resource for September 2026 and covers only the laws of England and Wales. Information is for general guidance, not legal advice. Consult a qualified solicitor for advice specific to your situation.
Learn what innocent misrepresentation is in English and Welsh contract law, how misstatements made in good faith affect contracts, the remedies available including rescission and damages under the Misrepresentation Act 1967, and key practical considerations for claimants and defendants.
When entering a contract, parties often rely on statements made during negotiations. If those statements prove false, the law of misrepresentation may allow the affected party to unwind the contract or seek other remedies. One important category is innocent misrepresentation - a false statement made honestly and without fault. This article explains what innocent misrepresentation means, how it differs from other types, what remedies are available, and practical considerations for consumers and businesses in England and Wales.
What Is Misrepresentation?
Misrepresentation is a false or misleading statement of fact or law made by one party to another before a contract is entered into, which induces the other party to enter that contract. If those elements are proven - that the statement was false and that it materially influenced the decision to contract - the contract may be voidable at the option of the misled party.
A misrepresentation must be more than mere opinion or sales “puffery”; it must relate to existing facts or law that a reasonable person would regard as important to their decision.
Types of Misrepresentation
Under English law, three main types of misrepresentation are recognised, and the type affects the remedies available:
- Fraudulent misrepresentation – where the statement was made with knowledge of its falsity, without belief in its truth, or recklessly as to its truth.
- Negligent misrepresentation – where the statement was made carelessly or without reasonable grounds for believing it to be true (often under the Misrepresentation Act 1967).
- Innocent misrepresentation – where the representor honestly and reasonably believed the statement was true at the time it was made.
This article focuses on innocent misrepresentation.
What Makes Misrepresentation “Innocent”?
An innocent misrepresentation is a false statement of fact or law made before a contract, where:
- The representor had an honest belief that the statement was true when made.
- There were reasonable grounds for that belief.
- The misled party relied on that statement to enter the contract.
Crucially, there is no fault such as dishonesty or carelessness on the part of the representor. The statement turns out to be false, but the person making it believed it to be true and had reasonable grounds for holding that belief.
Legal Framework: Misrepresentation Act 1967
The Misrepresentation Act 1967 significantly shapes how misrepresentation claims, including innocent misrepresentation, are treated in England and Wales. Before the Act, innocent misrepresentation allowed only rescission as a remedy; the Act introduced broader options.
Section 2(2) of the Act gives courts the discretion to award damages in lieu of rescission in cases of innocent misrepresentation if it would be equitable to do so. This means that even if the misrepresentation was made innocently, monetary compensation may be awarded instead of or alongside unwinding the contract.
Remedies for Innocent Misrepresentation
The main remedies are:
1. Rescission (Unwinding the Contract)
Rescission is the primary remedy for innocent misrepresentation. It aims to put both parties back in the position they were in before the contract was made. This typically involves:
- Returning any payments made under the contract.
- Returning goods or property transferred.
- Accounting for any benefits received under the contract.
Rescission is an equitable remedy, so it is subject to limitations and may not be available in all cases.
2. Damages in Lieu of Rescission
Under section 2(2) of the Misrepresentation Act 1967, courts may award damages instead of rescission where it is fair and just given the nature of the misrepresentation and the losses suffered by the claimant. This is discretionary and typically considered when unwinding the contract would cause disproportionate hardship or be impractical.
Unlike damages for negligent or fraudulent misrepresentation under section 2(1), damages in lieu of rescission for innocent misrepresentation are not a matter of right - the court decides based on fairness and equity.
Practical Criteria for Innocent Misrepresentation
To establish innocent misrepresentation, the claimant must show:
- A false statement was made before the contract.
- The claimant relied on that statement when agreeing to the contract.
- The representor honestly believed the statement to be true and had reasonable grounds to do so.
The burden of proof lies with the claimant to demonstrate reliance and falsity. However, establishing “reasonable grounds” for the representor's belief may be a factor the representor uses in defence.
What Happens After Innocent Misrepresentation Is Proven?
If a court finds that a contract was induced by innocent misrepresentation, the usual outcome is one of the following:
- Rescission - setting aside the contract so it is treated as though it never existed.
- Damages in lieu - compensation awarded instead of rescission where rescission is inappropriate.
A court may refuse rescission if it is impossible to restore both parties to their pre‑contract position (for example, goods have been consumed or cannot be returned), or if too much time has passed.
Limitations and Practical Risks
There are important limitations on pursuing rescission or damages:
- Affirmation: If the claimant continues to perform the contract after discovering the misrepresentation, they may be deemed to have affirmed the contract and lost the right to rescind.
- Delay: Undue delay in seeking rescission may be a bar to that remedy.
- Third‑party rights: If rights have passed to an innocent third party (for example, the goods have been sold on to a third party), rescission may be barred.
These factors reflect the equitable nature of rescission and the need for timely and appropriate action.
Example Scenario
Imagine a small business buys specialised software after being told by the supplier that the software has certain capabilities. Later, it transpires that those claims were incorrect, but the supplier honestly believed them to be true based on their supplier's specifications. In such a case, the buyer may have a claim for innocent misrepresentation if they relied on the statements in deciding to enter the contract. The court would then consider whether to unwind the contract (rescission) or award damages in its place under the Misrepresentation Act 1967.
Key Takeaways
Innocent misrepresentation arises where a false statement was made honestly and with reasonable belief in its truth, inducing another party to contract. Under English and Welsh law, this category:
- Allows the contract to be rescinded.
- Permits the court to award damages in lieu of rescission under section 2(2) of the Misrepresentation Act 1967.
- Is distinct from negligent and fraudulent misrepresentation in terms of fault and remedies.
Parties affected by innocent misrepresentation should consider timing, evidence of reliance, and the practicality of restoring pre‑contract positions when evaluating their options.
